AFG – Competition Index – March 2016

Which bank takes the lion’s share?

AFG (ASX:AFG) has today reported a surge in business heading to one of the country’s biggest lenders as the majors flex their balance sheet muscle to win back market share in a very competitive home lending market.

The latest AFG Competition Index shows that the majors have again outrun the non-majors in the hunt for business with one of the country’s biggest lenders significantly increasing their proportion of the market share for the start of 2016.

AFG General Manager of Sales and Operations Mark Hewitt said with reports of the flow of home lending slowing, the competition for market share has intensified even further. Several lenders are advertising rates of less than 4% so it is great time to be a borrower.

“The most marked increase has been the flow of business to Commonwealth Bank, which has increased its share of our flow from 17% to more than 23% in the last quarter. Commonwealth Bank subsidiary Bankwest was the other lender to record an increase in flow for the same quarter with a jump from 5% to 7%, giving the Commonwealth Bank group an overall market share of close to 31%.

Commonwealth Bank’s share of fixed rate lending for the quarter was a key driver with a jump from 13.8% to 24%. “The ‘Big Four’ all reported big increases in their share of fixed rate lending apart from Westpac which initially gained share but then dropped back to finish the quarter leveled out at 9%.

Amongst the non-majors the winners for the quarter were ME Bank which jumped from 1.4% to 2.5% and AMP who increased their market share from 1.4% to 2.2%.

Most of the larger non-majors have lost market share. BOQ fell from a peak of 7% during the quarter to 2.5% as it experienced difficulties processing the volume of loans it received. ING fell from 3.3% to 1.5%, Suncorp from 3.6% to 2.7% and Macquarie from 3.7% to 3%.

“When an organisation with the size and balance sheet power of Commonwealth Bank responds to competition, it can be very difficult for their smaller competitors to match them,” concluded Hewitt. “The broker channel is a highly effective and efficient channel for lenders to distribute their products and a competitive consumer offer is quickly taken up by brokers on behalf of their customers.”

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